LITTON LOAN SERVICING, L.P., THE BANK OF NEW YORK, MELLON FKA THE BANK OF NEW YORK AS SUCCESSOR TO JP MORGAN CHASE BANK, N.A., AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATE HOLDERS OF POPULAR, ABS, INC. MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2005-3,

AIG FEDERAL SAVINGS BANK DBA WILMINGTON FINANCE,

CITIBANK, NA, and

GMAC MORTGAGE LLC,

Appellees.

Appeal from the United States Bankruptcy Courtfor the Eastern District of KentuckyBankruptcy Case No. 10-50990; Adv. Proceeding No. 10-05065

EXCERPT:

STEVEN RHODES, Bankruptcy Appellate Panel Judge. J. James Rogan, the trustee in this chapter 7 case, appeals an opinion and order of the bankruptcy court dismissing his complaint. The complaint sought a declaratory judgment to determine the validity, extent, and priority of liens on the real property of the debtor, Elizabeth Collins, held by defendants Litton Loan Servicing, Bank of New York, GMAC Mortgage, and Wilmington Finance. The trustee also appeals an opinion and order of the bankruptcy court granting a motion to vacate the default judgment entered against Wilmington Finance.

For the reasons that follow, as to defendants Litton Loan Servicing and Bank of New York, the Panel vacates the dismissal and remands the matter for further proceedings to determine who was the holder of the first mortgage on the date of filing, and if it was either Litton Loan Servicing or Bank of New York, then whether either was the holder of a fully and properly indorsed note.

[…]

On the day after the first mortgage was recorded, February 5, 2005, Wilmington Financeassigned the mortgage to Mortgage Electronic Registration Systems, Inc. (“MERS”). On June 16,2005, this assignment was recorded. (Addendum to Br. of Bank of New York, February 16, 2011,app. case no. 10-8085, ex. 2.)

The record also includes an assignment dated March 26, 2010, the day after the debtor filedbankruptcy. MERS assigned this mortgage to the Bank of New York Mellon f/k/a The Bank of NewYork, as successor to JPMorgan Chase Bank, N.A. as trustee for the benefit of the certificate holdersof Popular ABS, Inc. Mortgage Pass-Through Certificates Series 2005-3 c/o Litton Loan Servicing.(bankr. claim 1-1.) On April 7, 2010, which was twelve days after the debtor filed bankruptcy, thisassignment was recorded. Thus, on the day that the debtor filed bankruptcy, it appears that neitherBank of New York nor Litton Loan Servicing held any interest in the first mortgage. Inexplicablyhowever, the debtor listed Bank of New York/Litton Loan Servicing on schedule D as the securedcreditor holding the first mortgage. (bankr. dkt. #1.) Schedule D appears to have been filed on thedate of the petition. The record does not provide an explanation for how the debtor would haveknown that Bank of New York/Litton Loan Servicing would be the secured creditor prior to theassignment.